Economists call for adoption of investment-led growth strategies

MAKATI CITY – Economists pushed for investment-led growth strategies in a virtual business roundtable on Thursday organized by the Stratbase ADR Institute.

Former Socioeconomic Planning Secretary Ernesto Pernia believes investment in physical infrastructure is more feasible via public-private partnerships (PPPs).

In his presentation, the former National Economic and Development Authority Secretary said “the current administration seems keen on undertaking PPP projects, especially given the economy’s tight fiscal constraints”.

“Physical infrastructure is a very costly undertaking  but… investment in physical infrastructure is more feasible via PPPs. It is crucial, though, that the conditions and guarantees imposed by the public sector on private sector partners are fair and sufficiently attractive for them to recover their investment cost and with reasonable returns,” Pernia explained.

Pernia urged the government to also invest heavily in human capital and social infrastructures such as schools and health centers to ensure economic progress.

“The vitality of the economy is only as good as the country’s health and education systems… The budget for physical infrastructure is P1.2 trillion. I would say that half of that should go to human capital and social infrastructure because the other half of the budget for physical infrastructure can come from the private sector via public-private partnerships,” he said.

Ateneo de Manila University Economics Department chairman Alvin Ang also emphasized the importance of PPPs and investing in human and social infrastructure.

“The power to push investment is really dependent a lot on the government and the private sector working together to bring in more investment opportunities in the country,” Ang said.

“We need to show consistency in how the previous PPPs were done. For example: the skyway, the LRT and the extensions… We have the models. We can show it. And we can ask investors to help improve our education and agricultural sectors as well,” he added.

Stratbase president Dindo Manhit believes mutual collaboration between the public and private sectors is vital to withstand global economic shocks and help rebuild the Philippines into a more resilient nation.

“To attain investment-led growth, the government must create a business environment that enables growth and innovation through market-friendly public policies, transparency, and good governance,” he added.

Manhit reiterated the push for the reinvigoration of the manufacturing sector that specifically caters to the domestic market.

“Foremost, it will significantly narrow our trade deficit, because we would lessen the need to import goods for consumption here in the country. Second, it would create jobs and other opportunities for the population, providing them income security, alleviating poverty, and revitalizing consumer spending,” he explained.

“For this to materialize, there is a need for serious policy and governance reforms. The government needs to provide greater support to domestic investors via incentives, and to address issues such as the unstable supply and high cost of electricity, and ease of doing business. The latter continues to be difficult and uneven as bureaucratic and regulatory concerns at both the local and national levels could often seem like roadblocks,” Manhit added.

Economist and financial professional Jonathan Ravelas also emphasized the importance of the manufacturing sector in a consumer-driven economy like the Philippines.

“We must be able to convince investors to come to the Philippines… Take advantage of a very young Filipino population. That is around 26.5 years old. They have the earning potential faster compared to other Asian economies. This is something that is unique for the Philippines and our population growth over the next decade will still be at 1 percent compared to our Asean peers. If you want to sell retail products, this is the place to sell it, in the Philippines. Manufacturing is key,” he explained.

For former Bangko Sentral ng Pilipinas Deputy Governor Diwa Guinigundo, a strong and trusted government leader and strong institutions are critical to ensuring a successful investment regime.

“We cannot overemphasize what we have been pointing out all these years— strong and trusted leadership is the most important. This will signal in the big way the path of the future. Making a big push for investment to ensure credibility is present. Public commitments must be supported by equally strong institutions. There shall be strong reliance on science and rules, competence and skill sets, independence and integrity of those in government system, strong monitoring system, and consultative engagement with both the private sector and the civil society,” Guinigundo explained.